Economic Survey projects 8.7% growth; calls for wider reforms

Published: Friday, February 29, 2008, 12:45 [IST]

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New Delhi, Feb 28 (UNI) Widening the ambit of reforms, the Economic Survey today called for 100 per cent FDI in greenfield private rural agriculture banks, phasing out controls on sugar, fertilisers and drugs and private management of public transport in metros and large cities, while projecting 8.7 per cent growth rate for the current fiscal despite challenges.

Suggesting that the FDI cap in the insurance sector be raised to 49 per cent, the 2007-08 survey, tabled by Finance Minister P Chidambaram in Parliament, makes out a case for raising foreign equity to 51 per cent in special category of insurance companies providing all types of insurance to rural residents and for agricultural-related activities.

The companies in this category would include those in the areas of health and weather and activities like agro processing.

Hinting at an upward adjustment in the targeted growth rate of 8.7 per cent in the current fiscal, it noted that it was revised upwards to 9.4 per cent in May 2007 and further to 9.6 per cent in the quick estimates released by the CSO in January this year.

''This suggests that upward adjustments in 2007-08 projections are possible ...The new challenge is to maintain growth at these levels, not to speak of raising it further to double-digit levels,'' it said.

According to the survey, inflation, based on wholesale prices, was expected to be about 4.4 per cent in the current fiscal, based on 10 months data. It vowed to keep prices under check by a prudent management of demand and supply of commodities.

The challenges to maintaining the growth momentum include the threat of a global slowdown, especially in the US economy, and impediments relating to the infrastructure and other areas.

It said greater integration of the economy with the rest of the world had made inflation management complex, and noted that increase in prices of petrol and diesel, announced earlier this month, would add 19 basis points to the inflation rate.

On the controversial issue of Special Economic Zones, the government's report card for the year makes a case for checking the proliferation of SEZs.

Giving his reaction on the survey, Mr Chidambaram said the outlook for 2008-09 was that of optimism, but with caution as the watchword.

''We need to capitalise on these opportunities while at the same time responding to the evolving situation in the global economy in a manner that our growth story is not affected.'' MORE UNI GS/SKS RP RN1625